Phelps, owner of 14 Olympic gold medals, was nearly a body length ahead coming off the final turn, but D`Arcy reeled him in to win in 1min 55.39sec to the 1:55.40 of the American great.

D`Arcy, 23, became just the second man since 2002 to beat Phelps in the event.

Phelps had stretched his 200m fly winning streak to almost a decade when he fell to China`s Wu Peng in consecutive races in the event this year -- at the Michigan Grand Prix in April and the Charlotte UltraSwim Grand Prix in May.

Phelps, who recently completed high demanding altitude training in Colorado, said that despite his defeat he hoped he was on track for the World Championships in Shanghai next month.

"I`m actually in a lot better place mentally than I was a couple of months ago and a couple of weeks ago," said Phelps, who also plans to compete in the 100m fly and 200m fly at a meeting in Montreal in a fortnight.

"Being able to come down from altitude and being able to do some of the work I did there I think is going to pay off the rest of the summer."

D`Arcy, second to Phelps at the Pan Pacific Championships last year, was delighted with the victory.

"It`s always great to beat somebody who`s possibly the greatest athlete who ever lived," said D`Arcy, who didn`t qualify for the World Championships. "Any chance you get to beat him; you`ve got to take it."

At the halfway stage of the race, D`Arcy admitted he did not think he would overtake Phelps.

"If you had asked me if I`d win at the 100 mark, I`d say no. If you`d ask me at the 150 mark, I`d say maybe," D`Arcy said. "I snuck a peek out of the corner of my eye and saw him, and I thought, `Well, I have a chance.`"

Emily Seebohm grabbed another gold for Australia, winning the women`s 100m backstroke in 59.77 despite the after-effects of a bout of food poisoning that saw her withdraw from racing on Saturday.

American teen Missy Franklin was second in 59.98 and Australia`s Meagen Nay third in 1:00.96.

American world record-holder Ariana Kukors won the women`s 200m individual medley in a blistering 2:09.53, with Australian Stephanie Rice second in 2:11.39.

Kukors` time saw her move ahead of Australia`s Alica Coutts (2:09.68) as the fastest in the world this year.